Foreign investors remain net buyers

Stocks fell further on thin activity levels as the market was heading towards Christmas holidays.

After tumbling on the first two days market gained on Wednesday, the last day of the week but was insufficient to recoup the losses it made early during the week thus ended modestly lower Week on Week (WoW).

During the holiday shortened three-day week the ASPI (All Share Price Index) lost 20.7 points or 1.35% to 1506.1 points while the liquid MPI (Milanka Price Index) edged down by 37.9 points or 2.25% to 1648.2 points to close the week on a negative note.

Interest continued on the diversified blue chip JKH, which saw 2.3 million shares changing hands during the week contributing Rs.118.7 million to the week’s turnover, which was the largest contribution by a single stock during the week.

JKH turnover accounted for almost 75% of the week’s total turnover coming mainly from a few large trades that took place on Wednesday. However the counter ended the week down by Rs.3.00 or 5.5% at Rs.52.00 after fluctuating within a wide price band of Rs.50.00 and Rs.54.50 per share.

Dockyard contributed Rs.4.1 million towards the weekly turnover with a volume of 0.1 million shares switching hands during the week. The counter saw its price rising 0.5% for the week before closing at Rs.50.00 on Friday. Dockyard share fluctuated within a price band of Rs.48.75 and Rs.50.25 per share during the week.

Investor interest was also seen on the banking stock Commercial Bank, which during the week traded a volume of 0.03 million shares to generate a turnover of Rs.2.3 million. The counter before closing at Rs.68.50 per share traded at a high of Rs.70.00 and a low of Rs.68.50 per share observing no change in the share price WoW.

Seylan Bank (Non Voting) during the week added Rs.1.9 million to the total weekly turnover with a volume of 0.4 million shares traded for the week. The counter before slumping 13.0% WoW at Rs.5.00 per share fluctuated within a price range of Rs.4.90 and Rs.5.75 per share.

With investors shifting away from the market ahead of Christmas holidays, activity levels further dried out during early part of the week and the joint turnover for the first two days stood at a low of Rs.34.8 million.

However boosted by JKH trades on the final day of trading, market managed to post a turnover of Rs.160.1 million for the week, which showed a 65.8% decline against last week. The average turnover for the week amounted to Rs.53.4 million for the week.

Foreign investors remained net buyers for the week amounting to Rs.113.9 million. Foreign purchases for the week stood at Rs.119.2 million, while foreign sales totaled to just Rs.5.3 million. The Rs.119.2 million foreign buying came largely on the back of foreign interest exerted on blue-chip JKH. However foreign participation for the week was at a low of 38.9% of total activity, compared to 51.1% posted last week.

Volume-wise the highest traded stocks during the week were JKH, Nawaloka, Tess Agro and Seylan Bank (Non Voting).

Indices continued on its downward trend for the 7th consecutive week on lower activity levels. Week on Week (WoW) market lost 20.7 points compared to last week’s closing levels.

We do not expect higher investor participation over the coming week, thus the overall sentiment would continue to be negative on thin activity levels.

Nevertheless we do not rule out a possibility of a slight recovery in the market with the dawn of the New Year, thus we advise investors to cautiously accumulate fundamentally sound stocks that have fallen to attractive levels with the recent market collapse.

The slump in 3rd quarter market earnings can be largely attributed to the poor performance in the highest capitalised telecom sector with intense competition eroding the profit margins. Meanwhile most other sectors also saw their profit margins shrinking in the back of high interest rates, inflation, energy prices and declining consumer spending.

We expect the pressure on market earnings to continue given the high interest rates and cautious consumer spending. Furthermore we believe the slow down expected in the domestic “HNB Stockbrokers (Private) Limited has the sole copyright for this report and the information and views contained cannot be reproduced or quoted in part or whole in any form whatsoever without the written permission from HNB Stockbrokers (Private) Limited. If anyone does such reproduction or quotation that person will be violating our legal rights and liable for the legal consequences therefore”.